Misconceptions

• A judgment must be entered against you in order to seize money from your bank account, since such garnishments are based on a court order. There is, however, one exception to this rule. The Internal Revenue Service (IRS) does not have to sue you in court to collect money owed to the federal government. Once the agency determines you owe back taxes, it has the power to garnish your wages, seize the money in your bank account and place a lien on your property unless you make arrangements to pay the tax bill.
  
  

Significance

• Other than the IRS, anyone who claims you owe him money must prove that in court. This prevents creditors or claimants from arbitrarily taking money from your accounts without due process. It also gives you the opportunity to defend yourself. Keep in mind that a judgment allows for the seizure of not only your personal bank accounts, but deposit accounts for a business that you own as well as the interception of money paid to that business.
  
  

Considerations

• A creditor with a judgment against you will have the right to levy, or collect by legal authority, the funds contained within your bank accounts. The creditor often doesn't know where you bank, so, according to attorney Justin Harelik on Bankrate.com, the creditor performs a skip trace, which means it investigates to learn which banks you have relationships with in the areas where you live or work. Once found, the creditor will issue a levying order to the bank that specifies the amount to be withheld. The sheriff then serves the bank with a writ of execution signed by the judge. After a 21 day holding period, the bank is required to give the withheld funds to the creditor. The creditor may be able to reduce the balance to zero, depending on state law.
  
  

Prevention/Solution

• According to the Federal Trade Commission, if you have problems paying your bills, you should contact the creditor directly and explain your circumstances. Judgments usually occur as a last resort. If you can work things out with the creditor, you may be able to save yourself bigger problems down the road. Once a creditor obtains a judgment against you, that creditor can try to collect on that judgment for years to come. In Florida, for instance, a creditor has up to 20 years from the date the judgment is entered to collect on the debt.
  
  

Warning

• According to Forbes, debt collectors buy zombie debt and then sue you to collect on it. Zombie debt is debt that is beyond the statute of limitations, which means you no longer have a legal responsibility to pay it. However, if the collector sues you in court for it and you fail to appear, the collector will then receive a default judgment against you. You are now legally responsible for this debt and the collector has the right to garnish your wages. Never ignore a collection notice, even if you no longer owe the money.